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Grain, livestock markets could prove volatile on Monday

Corn traders were apparently ambivalent Thursday night about the likely outcome of the weekly Export Sales reports released this morning. The data seemingly favored bears, since the actual sales total, at 189,700 tonnes fell short of industry forecasts in the 200,000-450,000 tonne range. Sellers could sustain only a portion of the downward pressure that arose in the immediate wake of the news, but proved able to force the market moderately lower Friday afternoon. We suspect the latest update of the weather models seemed to confirm rainfall potential over Argentine growing areas next week, which would help explain the late corn slide. However, technicians seemingly supported the nearby March future above its 40-day moving average (MA), thereby keeping the possibility of short-term gains very much alive. March corn ended the week having slipped 2 3/4 cents to $7.20 3/4, while December edged 1 1/4 cent lower to $5.83/bushel.

The Friday morning Export Sales report proved supportive of soybean futures, since the USDA soybean result, at 978,200 tonnes, topped predictions ranging from 750,000 to 950,000 tonnes. Moreover, weekly soymeal exports proved comparatively large. These suggest underlying demand for U.S. products remains strong despite the looming onset of the South American harvest and the likely bearish effect that could have on spot values around the globe. Wire service sources also cited firm Gulf Coast prices for a portion of the rise. On the other hand, the weather models continue implying significant Argentine rainfall next week, which may explain the losses suffered by deferred contracts across the soy complex. March beans rose 8 1/4 cents to $14.43 1/2 per bushel Friday, while March soyoil slipped 0.01 cent to 52.10 cents/pound and March meal gained $1.5 to $416.4/ton.

Wheat futures posted a surprisingly weak reaction to the weekly Export Sales data released Friday morning, but had risen substantially by the end of the day. Industry forecasts ranged between 350,000 and 550,000 tonnes, so the stated USDA figure, at 647,500 tonnes, seemed quite supportive. Some aggressive traders may have been anticipating a larger result, which might explain the quick post-report drop; but the subsequent rally certainly suggests most were pleased with it. The ongoing lack of rainfall predicted for the Southern Plains may also have boosted the market at the weekly close. March CBOT futures surged 8 cents to $7.76 1/2 as trading ceased Friday afternoon, while March KCBT wheat climbed 7 cents to $8.28 1/2 and March MGE futures spiked 10 1/4 cents to $8.65/bushel.

Thursday afternoon news of rebounding cash prices seemed to provide a major shot of confidence for cattle market bulls Friday, as indicated by the late-week CME rally. We suspect the apparent repudiation of a technical formation suggesting a major follow-through move to the downside also sparked fresh CME buying. Bulls can also take comfort from the monthly USDA Cattle on Feed report released after the Chicago close, since December placements fell short of forecasts, while late-2012 feedlot marketings easily topped expectations. Thus, cattle futures seem likely to open strongly next Monday morning. February cattle had gained 0.43 cents to 126.30 cents/pound at the Friday afternoon close, while April advanced 0.40 cents to 130.75.

Ongoing cash market gains and widespread expectations for much of the same supported lean hog futures in late-week trading. Not only was the nearby February contract trading at a discount to spot values, seasonal patterns historically imply much more of the same over the next 2-3 weeks. However, talk of surprising cash and wholesale weakness may have undercut the Chicago swine market Friday afternoon. Late reports of sizeable cash losses had to be particularly disappointing, since many sources had argued that pork packers were running short of animals for operations planned for next week. Given the larger losses suffered by the spring and summer contracts, we wonder if the Russian-ractopamine issue was resurrected. February hogs closed 0.22 cents to 86.82 cents/pound, while June futures fell 0.52 cents to 97.12.